Since 2013, Precidian Investments has tried multiple times without success to gain approval from the Securities and Exchange Commission for a non-transparent, actively managed exchange-traded fund platform. It hopes it has the winning ticket this time around with Tuesday’s registration filing with the SEC to launch eight new funds under its ActiveShares umbrella.
In it its latest filing, the Bedminster, N.J.-based company has a pair of mutual fund industry heavyweights behind it—The Royce Funds and Clearbridge Investments.
In prior Precidian filings, the SEC has cited concerns around its pricing methodology known as “verified intraday indicative value” (VIIV), which is a complex, real-time pricing process based on the current trading spreads of the underlying holdings. The SEC says it’s an imprecise way to calculate share prices, and the regulator had further concerns that insiders may have access to portfolio moves in real time.
Will the latest iteration of ActiveShares pass muster with regulators? Precidian remains hopeful. “We think we have addressed the SEC’s concerns in our exemptive relief filings,” says a Precidian spokesman. “And we’ll continue to address any concerns they have.”
Meanwhile, Eaton Vance has stolen a march on the non-transparent, actively managed exchange-traded product movement with its NextShares LLC family of exchange-traded managed funds.
Eaton Vance's NextShares funds are characterized as exchange-traded managed funds, in part because they are priced around the previous day's closing price, plus-or-minus a spread. Precidian's ActiveShares are classified as ETFs because they trade off of real-time intra-day quotes.
Fifteen investment management companies are licensees of the NextShares structure, including Eaton Vance. Eight funds from three fund providers—Eaton Vance, Gabelli and Ivy Investments—currently trade on the market.
Regarding ActiveShares, the proposed funds from Royce and Clearbridge would post their complete portfolio holdings on a quarterly basis, and would post partial information—such as top 10 holdings or sector breakdowns—on a monthly basis
These two mutual fund companies have built a very strong reputation with investors over the years. The Clearbridge Large Cap Growth fund (SBLYX), for example, has beaten the S&P 500 by an average of more than three percentage points over the past five years, and garners a five-star rating from Morningstar. Royce has built a strong franchise with its small-cap and micro-cap mutual funds.